Climate change is changing the financial landscape of Australian insurance companies. The Insurance Australia Group (IAG), whose profit margin is expected to be hit anew by natural catastrophes, warned that the changing and less-predictable climate has the potential to reduce insurers’ capacity to calculate, price and spread the weather-related risk.

IAG warned shareholders on Tuesday of a possible earnings downgrade due to claims related to the Christmas Day hailstorm in Melbourne. The claims were higher than expected, Australia’s biggest insurer of homes and cars said.

For the Melbourne hailstorm, IAG received 24,000 claims which would boost natural peril costs for the last six months of 2011 from A$400 to A$420 million. The amount would be higher than the Sydney-based firm’s A$266 million allowance or a 58 per cent overrun.

The same catastrophe would cost Suncorp A$200 million to A$250 million to cover 28,000 claims the insurer received. The amount is 75 per cent above Suncorp’s allowance.

For 2012, IAG is forecasting payments of up to $720 million for catastrophic reinsurance as the insurer braces for more natural disasters such as floods, cyclones and bushfires. It hinted that premiums may go up this year, averaging between 5 and 10 per cent. (IBT)